Page Updated March 12, 2022
In response to the COVID-19 pandemic, the CARES ACT expanded loan options for small businesses, and we expect podiatric offices to take advantage of one or both loan options. Detailed information about both options is available on this page.
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As part of the CARES Act and the second December 2020 $900 billion COVID relief package, Congress provided the initial round and second round of PPP loans that were available to small businesses impacted by the COVID-19 crisis. Eligible entities for both rounds included:
First Draw PPP Loans (FDLs)
|The eligible entity must be 500 employees or fewer.|
Second Draw PPP Loans (SDLs)
The eligible entity must be 300 employees or fewer and have already received a first draw PPP loan.
The eligible entity must also demonstrate at least a 25 percent reduction in the first, second, or third quarter relative to the same 2019 quarter. If a business was not in operation in 2019, the Act provided applicable timelines for demonstrating a loss.
An eligible entity may only receive one PPP second draw loan. For loans of $150,000 or less, the entity could have submitted a certification attesting that the entity meets the revenue loss requirements on or before the date the entity submits its loan forgiveness application.
FDL and SDL PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs (capped at $100,000 per employee annualized), in 2019, 2020, or the year prior to the loan. The maximum loan amount is $10 million for first-time borrowers and $2 million for second-time PPP borrowers. Both first and second draw loans are forgivable if the funds are used on the following eligible costs:
To be eligible for full loan forgiveness, PPP borrowers must spend no less than 60 percent of the funds on payroll over a covered period of their choice between eight and 24 weeks.
In the December 2020 COVID-19 relief package, Congress also addressed the following:
FDL and SDL forgiveness:
Recipients of both first draw and second draw loans would be eligible for forgiveness equal to the sum of their payroll costs, as well as covered mortgage, rent, and utility payments, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures incurred during the covered period. The 60/40 cost allocation between payroll and non-payroll costs in order to receive full forgiveness will continue to apply.
Borrowers should contact their lenders for additional information on the loan forgiveness process.
There are two loan forgiveness applications, dependent on how much money your practice received:
APMA encourages borrowers to contact their accountants to assist with preparing the appropriate documentation. There is no explicit deadline for submission, PPP loan recipients should contact their lender directly for information on submitting the loan forgiveness application.
NOTE: Borrowers had until December 31, 2020, to restore their full-time employment and salary levels for any changes made between February 15 and April 26, 2020.
The PPP Flexibility Act added additional exemptions to the reduction in the amount of loan forgiveness. Under the new law, the amount of loan forgiveness will not be reduced based on a reduction in the number of full-time equivalent employees if the borrower, in good faith:
Borrowers may owe money when their loan is due if they use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments after receiving the loan. Borrowers will also owe money if they did not maintain their staff and payroll. If any or portion of the loan is not forgiven, these loan terms apply for all borrowers.
Changes in Ownership if Owner has received a PPP Loan
On October 2, 2020, the SBA also released additional guidance on whether or not the SBA needs to approve any change in ownership. The SBA clarified that for 7(a) loans made under the PPP, no approval is required if the borrower has repaid its PPP loan in full or if it has applied for forgiveness with a final determination on forgiveness having been made (as evidenced by the SBA's payment to the lender) with either the full amount of the loan forgiven or the borrower having repaid any unforgiven amount.
If you have PPP amounts outstanding, it depends on several factors.
The borrower must seek approval of the SBA before effectuating any other ownership change, regardless of whether it is an equity or asset sale. As part of the approval process, the borrower must submit certain information to the SBA (through its lender), including the following:
The SBA will issue a determination within 60 days of the receipt of a complete request.
Additional Resources from APMA Partners
Still Available - Loan Increase Available to Existing EIDL Recipients
While the SBA is not accepting new EIDL applications, if you previously received an EIDL, you can apply for an increase up to the amount you qualify for or the $2,000,000 cap, whichever is lower. The SBA began approving loans greater than $500,000 on Oct. 8, 2021. In order to apply for an increase, you must login to your account in the COVID EIDL portal.
The deferment period for any loan increase will be 24 months from the date the COVID EIDL loan was first disbursed (not the date of increase). If you received a loan in 2020 or 2021 that does not have a 24-month deferment period, SBA will reset your deferment period to 24 months from the date your loan was first disbursed to you.
The amount of loan increase that you are eligible for is determined by the loan amount that you would be eligible for if you applied today minus the loan (including any increases) that you have already received. You may apply for an additional increase even if you have already applied for and received previous loan increase. For example, if you are eligible for a $700,000 COVID EIDL loan today, but your current COVID EIDL loan is $500,000 (either because your maximum loan amount was capped in the past or because you elected to take less than the full amount), you are eligible to request an increase of $200,000.
EIDLs are available to small businesses, independent contractors, and sole proprietors in declared disaster areas, which now includes all 50 states and territories. To qualify for an EIDL, the applicant must have suffered “substantial economic injury” from COVID-19. Substantial economic injury generally means a decrease in income from operations or working capital with the result that the business is unable to meet its obligations and pay ordinary and necessary operating expenses in the normal course of business.
Eligible recipients can receive up to $2 million in assistance, which can include a $10,000 Emergency EIDL (cash advance grant). EIDL loans under the CARES Act are based on a company’s actual economic injury determined by the SBA (less any recoveries such as insurance proceeds)
Unlike PPP, EIDLs generally do not have any loan forgiveness provisions. However, applicants that already applied for an EIDL loan can refinance their EIDL under the PPP. Additionally, the Emergency EIDL loan (next section) of up to $10,000 is not expected to be repaid, even if you are subsequently rejected for an EIDL.
$10,000 Emergency EIDL (Cash Advance Grant)
Proceeds of the overall EIDL may be used for:
Applications for an EIDL and Emergency EIDL can be submitted from January 31–December 31, 2020.
Eligible small businesses can apply for a loan at https://disasterloan.sba.gov/ela. For questions, please contact the SBA disaster assistance customer service center at 1-800-659-2955 (TTY: 1-800-877-8339) or email email@example.com. Eligible businesses should expect a disbursement of monies within five business days of a successful application.
The interest rate on EIDL loans is 3.75 percent fixed for small businesses and 2.75 percent for nonprofits. The EIDL loans have up to a 30-year term and amortization (determined on a case-by-case basis).
The accounting and business advisory firm of Marcum, LLP is providing information to help podiatric practices survive during the pandemic and economic downturn and to start planning for the recovery.
Article 1: Guide to COVID-19 Small Business Loans
APMA has compiled resources on other SBA loans, state loans for small businesses, private resources and consumer assistance available to podiatric practices.
APMA partnered with Marcum LLP to offer its members a one-hour webinar about recent COVID-19 legislation and resources for you and your practice. Download a copy of the presentation and a copy of the Q&A from the presentation. Marcum LLP provides a detailed guide to small business loans as an update to its How Your Practice Can Survive COVID-19 webinar.
Disclaimer: This resource is for information purposes only. APMA advises doctors of podiatric medicine to speak with an attorney or financial advisor duly licensed in their jurisdiction.